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How Badoo built a billion-pound social network... on sex

This article was taken from the May 2011 issue of Wired magazine. Be the first to read Wired's articles in print before they're posted online, and get your hands on loads of additional content bysubscribing online.

It's a 120-million-member social network that's adding over 300,000 users a day, with more than 4.3 million daily photo and video uploads, and seven billion monthly page views. It has Facebook's fastest-growing app, with 570,000 new daily users, making it the third-biggest app of all after FarmVille and CityVille. Hugely profitable, it's forecast to generate hundreds of millions of dollars this year, and is being aggressively courted by venture-capital firms valuing it in the billions. And it's run from London by a secretive Russian serial entrepreneur who has steadfastly refused to be interviewed or photographed. Until now.

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The world's largest social network

Badoo is the world's largest social network that you probably haven't yet heard of. Run from 800-square-metre loft-style offices in Soho, it is brilliantly effective at providing one simple and universally compelling service: hooking up members according to their profile pictures and location. "Chat, flirt, socialise and have fun!," implores the home page, alongside photos of prospective friends such as Terri, 21 ("Wants a candlelit dinner"), and Christopher, 25 ("Wants wake up with a girl" [sic]). Sign in, and a message declares that "204,516 girls [or guys] near you are looking to meet a guy your age!".

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Explain your intentions (the pull-down menu's suggestions include "to talk about sex", "to get a massage", "to flirt") and Tatyana, Oshrit or Gary might just give you access to their stash of private photos.

Still barely registering in Britain or the US, the free-to-use network -- on the web and via smartphones -- is a mass phenomenon in Brazil (14.1 million members), Mexico (nine million), France (8.2 million), Spain (6.5 million) and Italy (six million). Relying on word-of-mouth rather than any marketing spend, it has cracked the internet's eternal conundrum: how to persuade users to pay hard cash in a world drowning in free digital services and content, by charging members each time they want to boost their visibility to others searching for a date.

A year after Badoo's 2006 launch, when it had 12 million members, Russia's Finam Technology Fund bought a ten per cent stake for $30 million, valuing it at $300 million (this year Finam will realise an option for a further ten per cent at a higher valuation). Today, A-list investors such as Sequoia and Accel are courting the business and there is talk of an initial public share offering. "Cracking the Anglo-Saxon market will probably give us double to triple today's reach," says Bart Swanson, recruited as CEO last September, having expanded Amazon into Europe and run EMI in France. "The opportunity for people discovery [through Badoo] is a horrendously large market -- it's a confluence of social, proximity, mobile, and it's extremely local. The basic mechanism of what Andrey has developed is genius -- just like Google with its AdWords, it's people paying for self-promotion. And it works."

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Mysterious Andrey

Andrey is Andrey Andreev, originally from Moscow but based in London for the past six years, who founded Badoo on a string of other highly profitable Russian internet businesses: Mamba, SpyLog, Begun. Andreev, a youthful 37 with a cherubic smile below a floppy fringe, has so far eluded media attention: Russian Forbes last year called him "one of the most mysterious businessmen in the West" (it also reported his original name as Andrey Ogandzhanyants, under which the SpyLog.net domain was registered). We were introduced in January by Israeli investor Yossi Vardi at Burda's DLD conference in Munich, which Vardi co-chairs, and later met in London. (Vardi has no stake in Badoo.) And then in mid-February, alone in an office belonging to Freud Communications, Andreev agreed to share his story. It has been a busy few days. Andreev explains that Michael Moritz, the legendary Sequoia investor who took early stakes in Google and Apple, has just flown in from Palo Alto to meet him; he has also been meeting Kevin Comolli of Accel's London office. Moritz declined to speak to Wired, but Comolli -- whose investments include Playfish, Kayak and Getjar -- calls Andreev a "genius" with whom he would like to work. "Badoo is a social phenomenon," Comolli says. "It's explosive growth, viral, it's playful, it seems consistent with offline social interaction but in this hypervirality mode that only the internet has enabled. The secret sauces in companies like this are so nuanced, and the difference between getting it wrong and right lies only with these special people like Andrey. He's created something very powerful." So why has Andreev remained silent? "I love to focus on making things rather than exploring myself," he says quietly and precisely, his 5' 8" frame constantly moving in agitated discomfort at being quoted on the record for the first time. "I don't feel that it helps to make money or make business."

And now? "I feel Badoo is ready for me to identify with. Because it works, it grows like crazy. And people love it."

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There is another unspoken reason: with an IPO being considered, the company needs to raise awareness to maximise the valuation being floated by investors and bankers (currently being discussed at "around $2 billion", according to Andreev). The business is printing money: revenues and profit are growing by "double-digit percentages" each month, he says. "We see bankers everywhere. We are like celebrities."

Badoo explodes

Badoo launched in late 2006 in Spain, where Andreev was then living, as a conventional photo-sharing website. "We assumed that the 'meet new people' idea wouldn't work there -- Spanish girls are like princesses, you couldn't touch them, you had to meet their parents first before inviting them to the cinema," he says. The site wasn't generating revenue, but numbers were growing sharply: the 2007 Google Zeitgeist list of fastest-rising search terms listed "Badoo" second, just below "iPhone". In 2008, Andreev decided to test his assumptions of Spanish women and as an experiment refocused the site on meeting new people. "And the girls didn't leave. At that time, France was growing fast, Italy was.

Then one day we discovered we had 30,000 registrations in Turkey

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[that day]. What happened? Was it a hacker attack or scammers? No, someone wrote an article about us. It's as if all the users jumped on the bus and went there. Bang -- in two months, suddenly we have a Turkish market with a million members." Today the overall gender ratio is 45 percent female, 55 per cent male (in Brazil and Poland women outnumber men); 86 percent of users are aged 18 to 34.

Andreev introduced some simple premium services. You could pay a dollar or a euro to "rise up" the search results, and so attract greater attention. You could pay again to have your profile photo more widely visible across the site. He introduced virtual gifts to buy for your prospective date. "No one's pushing you to spend money, but if you want to attract more users, you have to pay," he explains. "You pay to advertise yourself. If you want something to go faster, you pay. And some people pay tens of times every day to rise up." By the end of 2009, the site had 48 million registered users -- a fifth of whom, then CEO Neil Bryant said at the time, were paying to boost their profile.

Badoo mobile "Then we had the idea of mobile -- how to meet people nearby,"

Andreev says. "We understood that people could meet each other in a big town, but how much more exciting to see who's sitting next to you in a café? Or you can just walk past a nightclub and see who you can pick up before you get in. It's another opportunity to hook up random people for adventure. We're talking about real life, real time. We know this girl is 500 metres from here now."

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5 items

Badoo Mobile launched last summer on the iPhone, and in March on

Android. Within weeks, with barely any marketing, the iPhone app was the number-one social-networking app in France; after eight months, it had been downloaded 1.5 million times. Andreev sees proximity as key to the business's future. Even desktop computer users can share their location by downloading an app that accesses Wi-Fi networks, IP addresses and other data points. "If you're sitting at home and someone's walking with an iPhone nearby, we know the distance between you. We can also show the iPhone user that you're nearby.

So it works for everyone."

Mamba

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Before Badoo there was Mamba, a Russian online-dating business that Andreev launched in 2004 as "an interface for offline relationships, for all type of adventures". It was, he says, profitable in month two. He offered it as a white-label service to existing dating sites, letting them keep their ad revenue and deepening their subscribers' pool of prospective dates. Once it had a million members, a similar model emerged: a free site, it let users pay via premium SMS to be more easily discovered. "You register, upload a profile picture, and we put you at the top of the search list,"

Andreev explains. "Then you slowly move down the hill -- if we have 50,000 new customers a day, you can quickly understand how many minutes of attention you have. When you lose attention, like a Google search result, no one finds you. "The first day [of this paid service] we made $5,000, the second $6,000, the third more -- I wasn't expecting this. But people love advertising themselves. Lots of people use this function several times a day. They become addicted."

A few weeks later, the site added the opportunity to be briefly visible on every page, for a fee. "This was even more successful.

Some people spent hundred of dollars every day. People complained they couldn't write SMS messages fast enough, and a lot on pay-as-you-go had to keep going to kiosks to buy new scratchcards to charge another $50." So Mamba began taking credit cards, online currencies, Yandex money. Revenues climbed ever more steeply. "We just sat back, relaxed, and added more services every day,"

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Andreev says. "There were virtual gifts -- before Zynga. You could send a gift, make a virtual phone call at 50 cents per minute. It was Mamba time. You can't imagine how cool it is to run things that are growing fast, getting revenue, watching the charts as the money grows -- it's a sport." He grins.

Finam invested a reported $20 million in 2005 for a majority stake; Mail.ru took a minority stake. After 18 months, Andreev had sold a fast-growing and highly profitable business, retaining no equity for himself. "I jump from project to project when I have new inspiration," he says. "I wanted the freedom to do whatever I wanted."

And he knew that the limited Russian market would not keep him excited for long. It was time to go global.

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It's 8.55pm on the last Saturday in February and, at the open ground-floor kitchen of L'Atelier de Joël Robuchon in Covent Garden, Andreev is seeking reactions to the soup he created.

L'oignon doux -- "Sweet onion soup 'Andreï style'", according to the two-Michelin-starred menu -- is something he devised when working in the kitchen as a weekend hobby alongside head chef Olivier Limousin. "I'm not sure if it was a joke, but when they got their second Michelin star," he says matter-of-factly, "Olivier said it was because of my soup."

Andreev slips unobtrusively into chefs' whites in this and other London kitchens as "sometimes you need a different type of adventure". He adds with a grin: "And I'm not talking about using Badoo." He learned cookery in Spain, where he lived before coming to London in 2005. "Street education. If you try to learn something, you just get it." Why did he move to London? "Badoo is not only in London -- we have offices in Prague, Miami, Malta, Cyprus and Moscow too," he says quickly and a little anxiously. But with around 65 of its 120 staff, including its management and executive teams, based in Soho, this is effectively a British business. "London's the international hub, where you can find anything you want," he says. "Crazy town. I feel at home here." He owns a house in central London -- but winces at the suggestion of naming the neighbourhood -- and spends weekends hiring luxury cars to explore England's countryside. "I've been everywhere, stayed in manors, castles, very cool." His social circle is a mix of locals and Russians, and he is single. "I don't know why. No time."

Marriage could happen one day, he says, "but I'm afraid to build a family now. I'm not sure I am able to give enough time." Does he use Badoo? "I use any option to meet new people, not only Badoo.

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But I do play with Badoo, yeah." And...he has enjoyed pleasant experiences? He pauses, then smiles. "Yeah. I think most of the guys and girls in the office are using it, they all have good experiences. And it helps them improve the features." Since hiring Swanson as CEO, Andreev has stepped back from day-to-day management to focus on product development. And, yes, he is thinking about his next project. "Always -- I have a black box of things to do, but it's not easy to jump from one to another." What type of business? "Look at my experience -- it won't necessarily be a dating or hook-up service. But it will be internet. The mobile internet is the biggest opportunity in the world. Smartphones outsold PCs last quarter. The opportunities will include meeting new people. Hook-up on mobile is a multibillion business. And on tablets."

Childhood

Andreev grew up in Moscow. He shows his identity card: born in February 1974. "You see my problem? I'm old," he says. "Normal family, parents in education, younger sister, mother teaching, father a professor of mathematics. They encouraged me to learn." But he became distracted by an earlier global communications network: amateur radio. "I was 14, and with a group of friends built a bunch of big black boxes and put a big antenna on the rooftop. It was not possible in Russia at that time to purchase anything from Europe, so it was a lot of fun to create something that could send 1kW of energy to the antenna on the roof. I spent years on this."

At 18 he began studying management at university in Moscow while holding down a job, but dropped out after 18 months and moved to Spain, where his parents had relocated. He had saved money through the job and had time to think about what to do next.

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A businessman was born

In 1999, he and some Russian friends -- "technical guys very into the internet" -- set up a web-tracking business, SpyLog, based in Moscow. It helped webmasters track not only visits to their sites, but users' habits on the wider internet. "It was big fun to make more and more statistics," Andreev says in his sometimes hesitant English. "We provided information about how much time they spent on other sites, what time they woke up and went to sleep, search requests. Most webmasters were very happy to pay for this information." The data let SpyLog serve targeted ads. The business grew quickly -- the main Russian portals used it -- but 18 months later, he became restless. "I had the idea for my next project. I was dreaming about advertising money. I knew you could make a lot from ads -- and if the market wants something that no one provides, you move."

The ad business was Begun -- again, based in Moscow -- which launched in 2002 selling contextual advertising by auctioning keywords. "It's like Google AdWords, but we started a bit earlier,"

Andreev says. (Google launched AdWords in 2000 but began keyword auctions in 2002.) "The marketing message was that for one cent you could buy one client. Soon, most keywords began to be very expensive." Andreev personally negotiated with the big search engines. Arkady Volozh of Yandex "never believed me about the opportunities"; rival site Rambler "proved very difficult". But he convinced Aport, then Mail.ru, and did a deal with Google. "We launched in April 2002, and ten weeks later were at breakeven. In month three, we returned everything that had been invested. We had a big success, so it was easy to speak to Rambler again. With money, you can speak with the big guys. It grew like crazy."

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As for SpyLog, "I just left. I kept some guys running it. It was growing, it was good." He retains no ownership. Why not sell his stake? "I just gave it to people," he says detachedly. "I was involved with my new venture, and I didn't feel I could be helpful to SpyLog any more." So he wasn't motivated by making money? He smiles. "No. I just walked away."

First date

Begun, meanwhile, had run its 18-month cycle for Andreev. By mid-2003, he began "playing" with dating as "it just felt there was money". At the end of 2003, Finam acquired 80 percent of Begun. "I can't talk about the price," Andreev says when pressed. "I can tell you that last year Finam tried to sell it to Google for $140 million, but the Russian government stopped the deal." He no longer has a stake.

So he is not one to look back. "No, I just swim to what's next."

He is easily bored then? "Maybe." And has he ever failed? "In terms of the big projects, never. In terms of small experiments, of course -- some work, some don't. I spoke with Andrey [Ternovskiy], the creator of Chatroulette, to see if he wanted to join Badoo so we could create an exciting feature. He refused, so we created our own

[webcam] section. A week later we just removed it. Big companies spend months on marketing research. We go much faster -- prototype, build, see if it works, kill."

The 2003 transaction made him a millionaire, but his lifestyle barely changed -- apart from developing a liking for German cars.

In London, he does not own a car, but prefers to rent Jaguars or Aston Martins. "New experience, new fun, new feeling," he says.

And though he has two passports, he plans to remain in the UK. "I love this country. I'd love to stay here."

The Badoo impact

Some join Badoo to find a relationship. Lucy, 19, told Wired she created an account after moving from Liverpool to London for university. "I had split up with my boyfriend due to distance," she says. "But it is hard to meet up with boys my type on my uni course. My friend Josh said he uses Badoo to look for guys and that I should try it, so he came over armed with some alcohol and I signed up."

A number of users sent Lucy "weird and inappropriate messages" (an offer to star in a porn movie; questions about her feet), but there were two men with whom she enjoyed chatting regularly. "Then the third one, I met up with. He's 20. I felt comfortable meeting up with him as it was in public, and he told me everywhere he was taking me. We've been on four dates and it's going well."

Others are open to more casual encounters. Edita, 35, from Madrid, says she makes friends, but "you can find a weekend roll" too. Rafe, also from Madrid, has done just that. "After nine months I started chatting with a guy. We talked for a month and one day he gave me his number. The next day he came to my house in the morning. I was alone. Within an hour we were in my bed naked."

Hooking up

The site's hook-up function -- accounting for four-fifths of usage, according to Swanson -- sometimes surprises new users. Mary, 19, from London, says she joined to make new friends, and didn't anticipate being approached for sex. "It's happened quite a bit and they usually ask for more than just one partner, which is actually making me want to leave. They are typically late 20s, 30s, even a 47-year-old." And although membership is restricted to over-18s, one member Wired spoke to revealed that she was only 16.

Some members are clearly there for professional sexual purposes.

We found accounts that heavily hinted at offline transactions for services rendered; users such as Silina -- 19 and in France -- began a conversation by proposing "a striptease for just six SMS codes".

Swanson says prostitution "hasn't surfaced as an issue since I've been here". Still, he accepts that "it's a risk -- when you have millions of users on a site, lots of things can happen. We have moderation, and when we see that happening, we delete those accounts." He adds that underage accounts are deleted when discovered.

Controversy

A network with Badoo's goals and scale naturally attracts controversy. Last July, the News of the World reported that a convicted sex offender had listed himself as "looking for love with girls aged between 18 and 25" and posted a photo of himself taken in a children's park. In January, the Finnish newspaper Iltalehti ran the headline: "Beware this Facebook application", accusing Badoo of collecting profiles without permission. And an evaluation of 45 social-networking sites by Joseph Bonneau and Sören Preibusch of Cambridge University gave Badoo the lowest score for privacy.

Is Andreev bothered by his site being accused, at the very least, of simply promoting promiscuity? "OK, which is bad?" he replies neutrally. "Badoo is not for sex, it's for adventure. If you go to a nightclub, of course you've got the opportunity to find a girl or a boy -- but it's not necessarily for sex, it could be to enjoy five mojitos and nothing else. "Badoo simply continues the offline lifestyle. Badoo is just a casual way to hook up with people, as you do in the street or nightclub. But we make the world work faster."

Badoo's future

So what's next? Today Badoo is in 24 languages, and takes payment in 100 currencies, but the company eyes huge growth potential -- not least in markets such as the UK, where Swanson says there are 150,000 users. And mobile: "If today 90-95 percent [of engagement] is via the web, in a year 50 percent will be mobile," Swanson says.

Badoo has barely got started on helping people hook up through their mobile devices. "Meeting people is the basis of evolution,"

Swanson says. "It's not like the person who's successful leaves, as with a dating site."

Does Andreev have Facebook in his sights? "Badoo is more of a social network than Facebook, as on Facebook you interact with your existing friends in an absolutely virtual life," he says. "Badoo is more social: it provokes you to go down on the street and meet these people."

As for Andreev's next move, in Swanson's words, "he's built up the mousetrap, he's involved in the strategic issues, but he's not that involved on the details and he's phasing himself out. My challenge is to keep him here as long as possible."

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Andreev interrupts. "You want to keep me? I need freedom, so I can build more things." He then notices an email on his iPhone and jumps up excitedly. "Forbes Russia just sent me an invitation," he says. "They've put me in the top 30 successful businessmen in Russia and they're inviting me to their party. I don't think I should be top 30, but top ten." He laughs. "Bart, what should I do with this?" "Say thank you," says Swanson. "You're not flying to Moscow."

Does he fear becoming more public? "For now, it's not a big problem," Andreev replies, "as now we have a company that's successful." He pauses. "It's a human thing. You have something cool. This is mine -- I made it. It's like a kid. Before you have this, what's there to talk about? That I'm cool?"

David Rowan is editor of Wired. Additional reporting by Charlie Burton.